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The role of national culture and corruption on managing earnings around the world

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  • Lewellyn, Krista B.
  • Bao, Shuji 'Rosey'

Abstract

Earnings management involves using managerial discretion to distort firm financial performance in order to mislead stakeholders. Drawing from institutional theory, we argue that national culture dimensions of power distance and institutional collectivism, which are related to how individuals view themselves with respect to others, serve as informal institutional forces that influence earnings management. We also propose that corruption, as an informal institution plays a significant role in explaining cross-national variation in earnings management. Using a sample of firms from 26 countries, we find support for both direct and interactive effects of these important informal aspects of the institutional context.

Suggested Citation

  • Lewellyn, Krista B. & Bao, Shuji 'Rosey', 2017. "The role of national culture and corruption on managing earnings around the world," Journal of World Business, Elsevier, vol. 52(6), pages 798-808.
    • Handle: RePEc:eee:worbus:v:52:y:2017:i:6:p:798-808
    DOI: 10.1016/j.jwb.2017.07.002
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